Quarter Ended March 31, Metric 2007 2006 % Change ------------------- --------- --------- -------- Average Available Beds 72,643 70,589 2.9% Average Compensated Occupancy 98.0% 93.7% 4.6% Total Compensated Man-Days 6,408,581 5,954,920 7.6% Revenue per Compensated Man-Day $ 54.01 $ 52.07 3.7% Operating Expense per Compensated Man-Day: Fixed 28.55 28.82 -0.9% Variable 9.49 9.74 -2.6% --------- --------- Total 38.04 38.56 -1.3% --------- --------- Operating Margin per Compensated Man-Day $ 15.97 $ 13.51 18.2% ========= ========= Operating Margin 29.6% 25.9% 14.3%Total revenue for the first quarter of 2007 increased 11.5% to $350.9 million from $314.6 million during the same period in 2006, as total compensated man-days increased 7.6% to 6.4 million from 6.0 million, and as revenue per compensated man-day increased to $54.01 from $52.07, an increase of 3.7%. The increase in revenue per compensated man-day is substantially due to per diems obtained on new management contracts. Average compensated occupancy for the three months ended March 31, 2007 increased to 98.0% from 93.7% for the same period in 2006, also as a result of the commencement of new management contracts combined with an increase in the demand for prison beds from a number of existing customers. Fixed expenses decreased $0.27 per compensated man-day to $28.55 for the three months ended March 31, 2007 compared with $28.82 per compensated man-day during the same period in 2006. The decrease in fixed expenses was primarily due to leveraging fixed costs over a higher inmate population. Variable expenses also decreased to $9.49 per compensated man-day during the first quarter of 2007 from $9.74 per compensated man-day during the first quarter of 2006, a decrease of $0.25 per compensated man-day, or 2.6%. The decrease in variable expenses per compensated man-day was primarily attributable to a decrease in inmate medical expenses resulting from the increase in inmate populations under management contracts that contain provisions limiting our medical risk. Business Development Update On May 2, 2007, we were awarded a contract to house up to 2,160 inmates at our Diamondback Correctional Facility, in Watonga, Oklahoma, by the Arizona Department of Corrections. The contract provides for an initial one-year term, and includes four additional one-year renewal periods. The contract also provides for a guaranteed 95% occupancy that becomes effective upon reaching 95% capacity following an agreed ramp-up period. We currently house approximately 1,400 Arizona inmates and approximately 650 Hawaiian inmates at this facility. We currently expect to relocate the Hawaiian inmates to our new 1,896-bed Saguaro Correctional Facility, in Eloy, Arizona, upon its completion in June 2007. In April 2007, through a competitive procurement process we were selected for the continued management of the 1,030-bed Marion County Jail in Indianapolis, Indiana. CCA has managed the Marion County Jail since 1997. The facility currently holds approximately 1,000 inmates from Marion County, Indiana. The contract, which is effective May 1, 2007 through December 31, 2017, provides for a minimum guaranteed monthly average occupancy of 1,025 inmates and may be extended by mutual agreement for up to 10 years. On March 29, 2007, as a result of anticipated demand for prison beds, we announced the second 360-bed expansion of our 1,104-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi. The two expansions of the Tallahatchie facility aggregate 720 beds which we expect to complete for an estimated cost of $39.0 million. Also on March 29, 2007, we announced our intention to expand our 767-bed Leavenworth Detention Center, in Leavenworth, Kansas, by 266 beds, at an estimated cost of $22.5 million. This expansion will also include a renovation of the existing building infrastructure to accommodate higher detainee populations. Status of California Contract On February 20, 2007, the Superior Court of California, County of Sacramento, ruled that the Governor of California exceeded his authority in issuing an emergency proclamation regarding prison overcrowding and that the contracts entered into by the California Department of Corrections and Rehabilitation ("CDCR") to utilize prison beds at private facilities outside of California to relieve prison overcrowding were thus unauthorized by the Emergency Services Act and that such contracts violate the California Constitution. A judgment based on that ruling was entered on April 2, 2007, including a permanent injunction against performing under the contracts signed pursuant to the proclamation, which would include contracts between us and the CDCR. The Governor and other state defendants have appealed that judgment. The Court of Appeal of California, Third Appellate District has temporarily stayed enforcement of this judgment, which means our contract with the CDCR remains in effect. We cannot predict the length of time this stay will remain in place or the ultimate outcome of the appeal. On April 26, 2007, the California legislature passed the "The Public Safety and Offender Rehabilitation Services Act of 2007," which, among other things, expands California's prison capacity through new construction and authorizes the transfer of inmates out-of-state through June 2011 without the consent of affected inmates. The Governor of California has indicated that he will sign this legislation, and announced an intention to transfer up to 8,000 inmates out of state. This statute may provide the Governor additional authority to enter into contracts for out-of-state prison beds. Although we believe that the legislative findings within the statute further strengthen the Governor's original assertion of emergency authority and support the constitutionality of that action, we cannot guarantee that this statute will be persuasive to the Court of Appeal of California. If the Court of Appeal were to lift its stay of the Superior Court's judgment, then the injunction would result in the loss of inmates we currently house. Regardless of the Court of Appeal's ruling, we cannot guarantee that the state of California will fully utilize the contracting authority created by this new statute, nor can we guarantee that this statute will not itself be challenged for violating the California Constitution or on other grounds. We currently have a contract with the CDCR which provides the CDCR the ability to place California inmates in several of our facilities. As of March 31, 2007 we held 356 California inmates. However, the number of beds we make available to California is dependent on the demand for our available beds from existing and potential customers and the capacity available within the time frame desired by the state of California. Facility Inventory and Development Update Current Inventory At April 30, 2007, CCA had available inventory of approximately 2,200 beds, which consists of approximately 1,900 owned and managed beds and 300 managed only beds. Most of these beds are contractually committed to existing customers; however, none of these contracts provide for guarantees of occupancy. We expect that a significant portion of these beds will be occupied over the next twelve months. Facilities Currently Under Development or Expansion In response to ongoing demand for bed capacity from a number of federal and state agencies, we have undertaken the following expansion and development projects:
Total Bed Capacity Estimated Following Estimated Total Cost Potential Beds Expansion Completion (in millions) Customer(s) ----- --------- ---------- -------------- ----------- Facilities Under Expansion -------------------- Gadsden Correctional Institution, State of Florida 384 1,520 Q3 2007 (1) Florida Bay Correctional Facility, State of Florida 235 985 Q3 2007 (1) Florida North Fork Correctional Facility, Various Oklahoma 960 2,400 Q4 2007 $ 55.0 States Tallahatchie County Federal Correctional and/or Facility, Various Mississippi 720 1,824 Q4 2007 39.0 States Eden Detention Center, Texas 129 1,354 Q1 2008 20.0(2) BOP Bent County Correctional Facility, Colorado 720 1,420 Q2 2008 44.0 Colorado(3) Kit Carson Correctional Center, Colorado 720 1,488 Q2 2008 44.0 Colorado(3) Leavenworth Detention Center, Kansas 266 1,033 Q2 2008 22.5 USMS(3) ----- ------------- Total Expansion Beds 4,134 $ 224.5 ----- ------------- New Facilities Under Development -------------------- Saguaro Correctional State of Facility, Arizona 1,896 1,896 June 2007 $ 103.0 Hawaii ----- ------------- GRAND TOTAL 6,030 $ 327.5 ===== ============= (1) The expansion costs of the Gadsden Correctional Institution and the Bay Correctional Facility will be funded by the state of Florida. Our management contracts for the Gadsden and Bay facilities expire on June 30, 2007. The state of Florida issued an Invitiation to Negotiate ("ITN") for the management of the Gadsden and Bay facilities. The Company has responded to the ITN; however, we can provide no assurance that we will be successful in securing a contract for the continued management of either of these facilities (2) The total estimated cost is for a renovation of the existing facility which will result in 129 additional beds. (3) We currently have contracts in place with the stated customers to occupy these facilities; however, the contracts do not provide a guarantee of occupancy.In addition to the above listed projects, we are actively pursuing expansion opportunities as well as a number of additional sites for new prison development. Our goal is to begin development of an additional 3,400 to 5,400 new beds in 2007. Commenting on the Company's financial results, President and CEO John Ferguson stated, "We are pleased with the Company's first quarter financial results and the continued improvement in our overall financial performance. Our revenues and operating margins continued to improve as a result of increased inmate populations both at the federal and state levels." "We are pleased to expand our relationship with the Arizona Department of Corrections at our Diamondback Correctional Facility, and are gratified by their continued confidence in our ability to satisfy their correctional needs." Ferguson continued, "The expansions that we are undertaking and the opening of our new Saguaro facility will create additional capacity that we can market over the next twelve months. We believe demand for new prison beds will continue over the foreseeable future, and one of our primary efforts going forward is adding beds that will allow us to serve this demand and to be a just-in-time provider to our government partners." Guidance The Company expects diluted earnings per share ("EPS") for the second quarter of 2007 to be in the range of $0.48 to $0.52, and full year EPS to be in the range of $1.97 to $2.07. The guidance above does not incorporate the effect of any incremental inmates we may receive as a result of the Governor of California's recent announcement to transfer up to 8,000 inmates out of state. While we are optimistic that we will benefit from California's decision, management does not presently have adequate information to reasonably estimate the impact on 2007 operating results. During 2007, CCA expects to invest approximately $275.5 million in capital expenditures, consisting of approximately $220.5 million in prison construction and expansions that have been previously announced, $37.0 million in maintenance capital expenditures and $18.0 million in information technology. Supplemental Financial Information and Investor Presentations CCA has made available on its website supplemental financial information and other data for the first quarter of 2007. We do not undertake any obligation, and disclaim any duty, to update any of the information disclosed in this report. Interested parties may access this information through our website at www.correctionscorp.com under "Financial Information" of the Investor section. The Company's management may meet with investors from time to time during the second quarter of 2007. Written materials used in the investor presentations will also be available on our website beginning on or about May 15, 2007. Interested parties may access this information through our website at www.correctionscorp.com under "Webcasts" of the Investor section. Webcast and Replay Information We will host a webcast conference call at 2:00 p.m. Central Time (3:00 p.m. Eastern Time) today to discuss our 2007 first quarter financial results. To listen to this discussion, please access "Webcasts" on the Investor page at www.correctionscorp.com. The conference call will be archived on our website following the completion of the call. In addition, a telephonic replay will begin today at 6:00 p.m. Eastern Time through 11:59 p.m. Eastern Time on May 10, 2007, by dialing 888-203-1112, pass code 6514583. About the Company Corrections Corporation of America is the nation's largest owner and operator of privatized correctional and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. We currently operate 64 facilities, including 40 company-owned facilities, with a total design capacity of approximately 73,000 beds in 19 states and the District of Columbia. We specialize in owning, operating and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, our facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training and substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates for their successful re-entry into society upon their release. We also provide health care (including medical, dental and psychiatric services), food services and work and recreational programs. Forward-Looking Statements This press release contains statements as to the Company's beliefs and expectations of the outcome of future events that are forward-looking statements as defined within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) fluctuations in our operating results because of, among other things, changes in occupancy levels, competition, increases in cost of operations, fluctuations in interest rates and risks of operations; (ii) changes in the privatization of the corrections and detention industry, the public acceptance of our services, the timing of the opening of and demand for new prison facilities and the commencement of new management contracts; (iii) our ability to obtain and maintain correctional facility management contracts, including as a result of sufficient governmental appropriations and as a result of inmate disturbances; (iv) increases in costs to construct or expand correctional facilities that exceed original estimates, or the inability to complete such projects on schedule as a result of various factors, many of which are beyond our control, such as weather, labor conditions and material shortages, resulting in increased construction costs; and (v) general economic and market conditions. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the Securities and Exchange Commission. We take no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release.
CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) March 31, December 31, ASSETS 2007 2006 ------------ ------------ Cash and cash equivalents $ 58,767 $ 29,029 Investments 83,922 82,830 Accounts receivable, net of allowance of $2,783 and $2,261, respectively 224,378 237,382 Deferred tax assets 12,288 11,655 Prepaid expenses and other current assets 12,808 17,554 Current assets of discontinued operations 416 966 ------------ ------------ Total current assets 392,579 379,416 Property and equipment, net 1,830,776 1,805,052 Restricted cash 11,973 11,826 Investment in direct financing lease 15,237 15,467 Goodwill 15,246 15,246 Other assets 23,146 23,807 Non-current assets of discontinued operations - 46 ------------ ------------ Total assets $ 2,288,957 $ 2,250,860 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $ 148,039 $ 160,522 Income taxes payable 5,976 2,810 Current portion of long-term debt 290 290 Current liabilities of discontinued operations 367 760 ------------ ------------ Total current liabilities 154,672 164,382 Long-term debt, net of current portion 975,895 975,968 Deferred tax liabilities 29,451 23,755 Other liabilities 41,535 37,074 ------------ ------------ Total liabilities 1,201,553 1,201,179 ------------ ------------ Commitments and contingencies Common stock - $0.01 par value; 80,000 shares authorized; 61,371 and 61,042 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively 614 610 Additional paid-in capital 1,535,599 1,528,219 Retained deficit (448,809) (479,148) ------------ ------------ Total stockholders' equity 1,087,404 1,049,681 ------------ ------------ Total liabilities and stockholders' equity $ 2,288,957 $ 2,250,860 ============ ============ CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) For the Quarter Ended March 31, -------------------- 2007 2006 --------- --------- REVENUE: Management and other $ 349,838 $ 313,592 Rental 1,077 1,036 --------- --------- 350,915 314,628 --------- --------- EXPENSES: Operating 249,130 234,650 General and administrative 17,318 14,377 Depreciation and amortization 18,270 15,678 --------- --------- 284,718 264,705 --------- --------- OPERATING INCOME 66,197 49,923 --------- --------- OTHER (INCOME) EXPENSES: Interest expense, net 13,934 15,126 Expenses associated with debt refinancing and recapitalization transactions - 982 Other income (11) (12) --------- --------- 13,923 16,096 --------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 52,274 33,827 Income tax expense (19,704) (12,483) --------- --------- INCOME FROM CONTINUING OPERATIONS 32,570 21,344 Loss from discontinued operations, net of taxes - (15) --------- --------- NET INCOME $ 32,570 $ 21,329 ========= ========= BASIC EARNINGS PER SHARE: Income from continuing operations $ 0.54 $ 0.36 Loss from discontinued operations, net of taxes - - --------- --------- Net income $ 0.54 $ 0.36 ========= ========= DILUTED EARNINGS PER SHARE: Income from continuing operations $ 0.52 $ 0.35 Loss from discontinued operations, net of taxes - - --------- --------- Net income $ 0.52 $ 0.35 ========= ========= CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED AND AMOUNTS IN THOUSANDS) CALCULATION OF ADJUSTED FREE CASH FLOW For the Quarter Ended March 31, ------------------ 2007 2006 -------- -------- Pre-tax income $ 52,274 $ 33,812 Expenses associated with debt refinancing and recapitalization transactions - 982 Income taxes paid (798) - Depreciation and amortization 18,270 15,678 Depreciation and amortization for discontinued operations - 25 Income tax benefit for discontinued operations - (8) Stock-based compensation reflected in G&A expenses 1,230 778 Amortization of debt costs and other non-cash interest 1,015 1,235 Maintenance and technology capital expenditures (10,456) (9,519) -------- -------- Adjusted Free Cash Flow $ 61,535 $ 42,983 ======== ======== CALCULATION OF ADJUSTED EBITDA For the Quarter Ended March 31, ----------------- 2007 2006 -------- -------- Net income $ 32,570 $ 21,329 Interest expense, net 13,934 15,126 Depreciation and amortization 18,270 15,678 Income tax expense 19,704 12,483 Loss from discontinued operations, net of taxes - 15 -------- -------- EBITDA $ 84,478 $ 64,631 Expenses associated with debt refinancing and recapitalization transactions - 982 -------- -------- Adjusted EBITDA $ 84,478 $ 65,613 ======== ======== CALCULATION OF ADJUSTED DILUTED EARNINGS PER SHARE For the Quarter Ended March 31, 2006 -------------- Net income $ 21,329 Special items: Expenses associated with debt refinancing and recapitalization transactions 982 Income tax benefit for special items (362) -------------- Adjusted net income $ 21,949 ============== Weighted average common shares outstanding - basic 59,300 Effect of dilutive securities: Stock options and warrants 1,544 Restricted stock-based compensation 222 -------------- Weighted average shares and assumed conversions - diluted 61,066 ============== Adjusted Diluted Earnings Per Share $ 0.36 ==============NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION Net income excluding special charges (Adjusted Diluted Earnings Per Share), EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company's results of operations and are used to review and assess operating performance of the Company and its correctional facilities and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis as that used by management. Management and investors review both the Company's overall performance (including GAAP EPS, net income, Adjusted Diluted Earnings Per Share and Adjusted Free Cash Flow) and the operating performance of the Company's correctional facilities (EBITDA and Adjusted EBITDA). EBITDA and Adjusted EBITDA are useful as supplemental measures of the performance of the Company's correctional facilities because they do not take into account depreciation and amortization, tax provisions, or with respect to Adjusted EBITDA, the impact of the Company's financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company's correctional facilities, management believes that assessing performance of the Company's correctional facilities without the impact of depreciation or amortization is useful. The calculation of Adjusted Free Cash Flow substitutes capital expenditures incurred to maintain the functionality and condition of the Company's correctional facilities in lieu of a provision for depreciation; Adjusted Free Cash Flow also excludes certain other non-cash expenses that do not affect the Company's ability to service debt. The Company may make adjustments to GAAP net income, Adjusted EBITDA and Adjusted Free Cash Flow from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, such as the special charges in the preceding calculation of earnings per diluted share excluding special charges (Adjusted Diluted Earnings Per Share), even though such items may require cash settlement, because such items do not reflect a necessary component of the ongoing operations of the Company. Other companies may calculate Adjusted Diluted Earnings Per Share, EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow differently than the Company does, or adjust for other items, and therefore comparability may be limited. EPS excluding special charges (Adjusted Diluted Earnings Per Share), EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company's operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company's consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.
Contact Information: Contact: Karin Demler (615) 263-3005